Fatah and Hamas would not have reached a reconciliation agreement had Prime Minister Binyamin Netanyahu immediately agreed to a Palestinian request to extend the 10-month settlement housing start freeze that ended in September 2010, opposition leader Tzipi Livni said on Saturday.

Speaking on the Channel 2 program Meet the Press, Livni said Israel needed a prime minister who could persuade the world not to allow a Palestinian state to be declared unilaterally at the UN General Assembly in September, but that Netanyahu did not fit the bill.

“In order to stop the unilateral process of recognizing a Palestinian state and get us off a track that is bad for Israel, Netanyahu must negotiate,” Livni said. “For him to be believed, he must pay prices.

“He needed to pay with a freeze but he stammered.”

Livni said Israel should agree to peace talks with the Palestinians, provided Hamas accepted the Quartet conditions of recognizing Israel’s right to exist, renouncing violence and respecting treaties signed by the Palestinians. But she also said there was no chance of reaching peace with Hamas.

The Kadima leader said that Netanyahu’s reaction to Palestinian reconciliation put Israel further into a corner. She cited the news that the European Union on Friday offered to increase aid to the Palestinians after the government announced that it would withhold the transfer of tax revenues to the Palestinian Authority in response to the Fatah-Hamas unity deal.

She said that elections in Israel would “stop the world in its tracks” if they realized that a new government willing to negotiate with the Palestinians was going to be chosen. She accused Netanyahu of only caring about his political survival.

The Likud said in response that instead of acting as a responsible opposition, Livni was attacking the government’s efforts to prevent a Hamas terror state from being created, in an effort to score political points in her own party.

Vice Premier Moshe Ya’alon (Likud) told an audience at a cultural event in Beersheba on Saturday that a lot of the threat Israel is facing in September comes in from inside Israel. He said the Palestinians use Israel’s internal divisions to try to extort concessions.

Reacting to the American slaying of al-Qaida leader Osama bin Laden last week, Ya’alon said that Hizbullah chief Hassan Nasrallah “should not be sleeping as well in his bunker.”